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February 26, 2008:
Report to the Congress:
Subject: The Judgment Fund: Status of Reimbursements Required by the No
FEAR Act and Contract Disputes Act:
The Notification and Federal Employee Antidiscrimination and
Retaliation (No FEAR) Act of 2002[Footnote 1] has, since October 1,
2003, required federal agencies to reimburse the Judgment Fund for
payments made to claimants to cover judgments, awards, and settlements
in equal employment opportunity (EEO) and whistleblower cases. As we
previously reported in 2004, the reimbursement provision of the No FEAR
Act was intended to make agencies more accountable for their violations
of employment discrimination and whistleblower protection laws brought
against the agencies.[Footnote 2] Similarly, the Contract Disputes Act
of 1978 (CDA) also has, since March 1, 1979, required agencies to
reimburse the Judgment Fund for payments to claimants in cases
involving federal contract disputes.[Footnote 3] The No FEAR Act
mandated that we conduct a study of the payments, reimbursements, and
effects of the reimbursement provisions of both No FEAR Act and CDA
cases.[Footnote 4]
In 1956, Congress established the Judgment Fund, which is a permanent,
indefinite appropriation to pay judgments against federal agencies that
are not otherwise provided for by other appropriations.[Footnote 5] In
1961, legislation was enacted allowing the Judgment Fund to pay, among
other things, Department of Justice (DOJ) settlements of ongoing or
imminent lawsuits against federal agencies.[Footnote 6] The Judgment
Fund is intended to allow for prompt payment of settlements and awards
to claimants, thereby reducing the assessment of interest against
federal agencies (where allowed by law) during the period between the
rendering and payment of such settlements and awards. The Judgment Fund
makes such payments upon certification that a court has handed down an
award or that a settlement has been reached. The Judgment Fund is
currently managed by the Department of the Treasury's Financial
Management Service (FMS).[Footnote 7]
In response to the mandate, the objectives of our review, for both No
FEAR Act and CDA cases, were to:
1. determine in how many cases payments were made from the Judgment
Fund for judgments, settlements, or awards resulting from (a) EEO and
whistleblower protection complaints after the No FEAR Act became
effective, and (b) contract disputes;
2. determine in how many cases and to what extent agencies made
reimbursements to the Judgment Fund and how long reimbursements took;
and:
3. obtain agency official and stakeholder views of the effects of the
requirement to reimburse the Judgment Fund on operations,
appropriations, employee relations and other human capital matters, and
settlement practices at federal agencies.
To address the first and second objectives, we obtained and analyzed
data from FMS on Judgment Fund payments made in fiscal years 2002
through 2006 and agency reimbursements made in fiscal years 2002
through March 31, 2007. We also discussed Judgment Fund payment and
reimbursement policies and procedures with FMS officials and reviewed
relevant regulations, policies, and guidance. To address our third
objective, we interviewed officials at seven federal agencies. Four of
these agencies--the Army Corps of Engineers (Army Corps), the
Department of the Interior (Interior), the General Services
Administration (GSA), and the Office of Personnel Management (OPM)--had
the largest unpaid obligations for CDA cases, according to FMS records.
The remaining three agencies--the Department of Agriculture (USDA), the
Department of Veterans Affairs (VA), and DOJ--had a large number of No
FEAR Act cases. In addition, we interviewed staff from the Office of
Management and Budget (OMB) to discuss the budgeting process for
dealing with the agency reimbursement requirements related to the
Judgment Fund. We held discussions with DOJ officials responsible for
representing federal agencies in EEO and contract disputes litigation.
We also spoke with officials from OPM and the Equal Employment
Opportunity Commission (EEOC) for their perspectives as leadership
agencies responsible for oversight of EEO and diversity programs in
federal agencies. OPM and EEOC are among the designated recipients of
No FEAR Act Section 203 reports, which agencies are to file annually to
provide information on, among other things, the impact of No FEAR
reimbursement obligations on agency budgets. Finally, we reviewed the
available Section 203 reports for agencies that had incurred No FEAR
reimbursement obligations to the Judgment Fund. Enclosure I contains
details of our objectives, scope, and methodology. We conducted this
performance audit from July 2006 to February 2008 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Results in Brief:
From fiscal year 2004, when the No FEAR Act took effect, through fiscal
year 2006, the Judgment Fund paid $45.1 million to claimants for
settlements, awards, and other costs involving 625 No FEAR cases at 36
federal agencies. Of this amount, federal agencies had repaid $44.9
million, or 99 percent, as of March 31, 2007. These No FEAR agency
reimbursements were made, on average, 4.8 months after the original
Judgment Fund payment.
For fiscal years 2002 through 2006, the Judgment Fund paid
approximately $1 billion for 475 cases under CDA on behalf of 30
federal agencies. Of this amount, federal agencies had repaid $510
million, or about 50 percent, as of March 31, 2007. Agencies completed
these full CDA reimbursements, on average, 9.6 months after the
original Judgment Fund payment. Our work, including interviews with
agency officials, indicates that several factors, including the much
greater amounts involved, and agencies' lack of success in obtaining
funds through the appropriations process, may be contributing to the
difference in reimbursement rates for No FEAR cases compared to CDA
cases. Also, one agency, which according to FMS owes a substantial
amount to the Judgment Fund, claims that it does not have the authority
to pay the unreimbursed balance that FMS attributes to it.
In May 2007, after we discussed collection management with FMS
officials, FMS drafted a new strategy, based in part on an internal
assessment of its approach to successfully obtaining No FEAR Act
reimbursements from agencies, to encourage agency reimbursements for
CDA obligations, such as direct discussions with agency chief financial
officers (CFOs). During our exit conference with FMS in November 2007,
FMS officials told us that FMS is implementing its new collection
strategy, which principally involves working with relevant agencies and
ensuring that it has complete information about the status of each
agency with regard to CDA reimbursement obligations. The new FMS
strategy could increase transparency regarding federal agencies'
obligations to reimburse the Judgment Fund and aid congressional
decision making with regard to any appropriations for relevant agencies
if it also included notification to Congress of the amounts owed by
individual agencies related to CDA cases.
Officials at the seven departments and agencies we visited told us that
the reimbursement provisions of the No FEAR Act have not had a
substantial impact on the operations or budgets of their respective
agencies, or on any awards and settlements made. Available reports
filed under Section 203 of the No FEAR Act by federal agencies that had
to pay reimbursements in No FEAR cases also indicated that the
reimbursements to the Judgment Fund had minimal effect on their
budgets. A DOJ official who manages EEO/whistleblower litigation for
federal agencies told us that the reimbursement requirements under No
FEAR have had little or no effect on whether such litigation is settled
or pursued in the courts. Also, DOJ officials who manage contract
disputes litigation for federal agencies told us that the CDA
reimbursement requirements have had no effect on agencies' preferences
or actions in settling litigation, or on DOJ decisions in such
situations.
As FMS implements its collection strategy, we are recommending that the
Commissioner of FMS notify Congress on a periodic basis of the amounts
owed the Judgment Fund by each federal department and agency for all
CDA obligations. We provided the Commissioner of FMS and the Attorney
General with a draft of this report for their review and comment. In
its written comments, FMS said that requiring that it report to
Congress on unpaid reimbursements by agencies would not increase
transparency regarding these unpaid balances. Rather, according to FMS,
it would simply create a duplicate reporting requirement because such
information is already available to Congress and others on the FMS Web
site. FMS further suggested that instead, agencies could report their
individual outstanding balances to Congress and OMB on a periodic
basis. We believe, however, that Congress's needs can best be served in
this matter by receiving all relevant information from a single source
on a periodic basis, rather than having to seek out this information on
a Web site or receive it piecemeal from individual agencies. DOJ
provided technical comments via e-mail, which we incorporated where
appropriate, but did not otherwise comment on the report or our
recommendations.
Background:
The types of cases covered by the No FEAR Act include employment
discrimination cases brought under various federal antidiscrimination
statutes and whistleblower protection cases. Under the No FEAR Act,
federal agencies are permitted to make reimbursement of the Judgment
Fund using any funds available for operating expenses of the agency,
except those funds available for the enforcement of any federal
law.[Footnote 8] The No FEAR Act expressed the sense of Congress that
agencies are expected to reimburse the Judgment Fund within a
reasonable time.[Footnote 9]
For CDA cases, the Judgment Fund makes payment when a contractor for an
executive agency receives a judgment from a court or an award from a
contract appeals board regarding a contract dispute, or agrees on a
settlement with the agency. Under CDA, reimbursement of the Judgment
Fund is to be made by the agency whose appropriations were used for the
contract "out of available funds or by obtaining additional
appropriations for such purposes." In the context of CDA, available
funds are those appropriations available for an agency's procurement
activities current at the time of award or judgment or that are
subsequently available. If the agency has insufficient funds available
for reimbursement, the CDA anticipates that the agency will seek
additional appropriations.[Footnote 10] In enacting this provision,
Congress intended to remove incentives agencies had to resist
settlements and force disputes into court, while making them fully
accountable for the costs of judgments.
Federal Agencies Have Made Nearly Full and Timely Reimbursements for No
FEAR Cases:
From fiscal year 2004, when the provisions of the No FEAR Act requiring
reimbursement of the Judgment Fund by federal agencies went into
effect, through fiscal year 2006, the Judgment Fund paid $45.1 million
in settlements, awards, and other costs in EEO cases. The average No
FEAR Act payment was $72,064, and payments ranged from less than $1,000
to just over $1 million, with a median payment of $27,250. As shown in
table 1, these payments were for 625 cases at 36 agencies. (Enclosure
II provides information on the number of No FEAR cases and the
associated amount of payments from the Judgment Fund for all applicable
agencies during the 3-year period we reviewed.)
Table 1: No FEAR Act: Number of Cases and Amount of Payments from
Judgment Fund (Fiscal Years 2004 through 2006):
Number of cases with payments[A, B];
Judgment Fund payment year 2004: 181;
Judgment Fund payment year 2006: 242;
Judgment Fund payment year 2005: 202;
Total: 625.
Number of agencies;
Judgment Fund payment year 2004: 25;
Judgment Fund payment year 2006: 28;
Judgment Fund payment year 2005: 31;
Total: 36[C].
Payments made (in millions);
Judgment Fund payment year 2004: $11.6;
Judgment Fund payment year 2006: $17.6;
Judgment Fund payment year 2005: $15.8;
Total: $45.1.
Average payment per case;
Judgment Fund payment year 2004: $64,159;
Judgment Fund payment year 2006: $73,923;
Judgment Fund payment year 2005: $78,086;
Total: $72,064.
Median payment per case;
Judgment Fund payment year 2004: $25,000;
Judgment Fund payment year 2006: $29,760;
Judgment Fund payment year 2005: $29,500;
$27,250.
Source: GAO analysis of FMS data.
[A] A case can have payments to one or more claimants.
[B] Cases could be initiated in a year prior to which payments were
made from the Judgment Fund.
[C] Total number of agencies is a count of unique agencies that had a
case in fiscal years 2004 through 2006.
[End of table]
Of the $45.1 million paid to claimants by the Judgment Fund for No FEAR
cases from fiscal year 2004, when the No FEAR Act came into effect,
through fiscal year 2006, agencies had fully reimbursed approximately
$44.9 million as of March 31, 2007. As shown in table 2, for these 3
years, No FEAR reimbursements were made, on average, 4.8 months after
the original Judgment Fund payment, with a range of less than 1 month
to 34 months. The average length of time required for agencies to fully
reimburse the Judgment Fund decreased from 7.5 months in fiscal year
2004 to 2.9 months in fiscal year 2006. (Enclosure II provides
additional information on the average length of time to reimburse the
Judgment Fund for No FEAR cases for all applicable agencies during the
3-year period we reviewed.)
Table 2: Average Length of Time for Agencies to Fully Reimburse the
Judgment Fund for No FEAR Payments in Fiscal Years 2004 through 2006:
Number of cases with payments;
2004: 181;
2005: 241;
2006: 201;
Total: 623[A].
Average length of time to fully reimburse Judgment Fund (in months)[B];
2004: 7.5;
2005: 4.4;
2006: 2.9;
Total: 4.8.
Source: GAO analysis of FMS data.
Note: Our analysis included data on reimbursements to the Judgment Fund
through March 31, 2007.
[A] As of March 31, 2007, two payments made by the Judgment Fund had
not been reimbursed: one in fiscal year 2005 and one in fiscal year
2006.
[B] Changes across years in the average (mean) length of time to
reimburse the Judgment Fund are comparable because virtually all cases
with payments in each year were reimbursed.
[End of table]
Officials at FMS and the agencies we visited cited three factors that
they believe have contributed to the nearly full reimbursement rate for
No FEAR Act cases.
* The amount of payment involved is relatively small compared to
overall agency budgets.
* Agencies are aware that the No FEAR regulations require FMS to post
on its Web site the names of agencies that have not reimbursed the
Judgment Fund for No FEAR Act cases.
* FMS has pursued a proactive strategy in seeking reimbursement of
Judgment Fund payments related to the No FEAR Act, including sending
initial notification letters on amounts owed, and, if necessary, making
subsequent personal contacts with agencies' CFO offices.
During our review, we asked officials at the agencies we visited about
the source of funds they used to reimburse the Judgment Fund for
payments in No FEAR cases. Agency officials told us that reimbursements
came from available agency operating funds. In several agencies,
payment amounts were drawn internally from the appropriation account of
the component where the case originated.
Reimbursement Rates for CDA Cases Are Significantly Lower than for No
FEAR Cases:
From fiscal year 2002 through 2006, the Judgment Fund paid just over $1
billion in awards, settlements, and other costs in cases under CDA. As
shown in table 3, these payments are related to 475 cases at 27
departments and agencies. The average CDA payment from the Judgment
Fund was $2.1 million, and payments ranged from less than $1,000 to
about $99 million, while the median payment was $302,486. (Enclosure
III provides information on the number of CDA cases and the associated
amount of payments from the Judgment Fund for all applicable agencies
during the 5-year period we reviewed.)
Table 3: CDA: Number of Cases and Amount of Payments from Judgment Fund
in Fiscal Years 2002 through 2006:
Number of cases with payments[A, B];
Judgment Fund payment years: 2002: 127;
Judgment Fund payment years: 2003: 107;
Judgment Fund payment years: 2004: 79;
Judgment Fund payment years: 2005: 79;
Judgment Fund payment years: 2006: 83;
Judgment Fund payment years: Total: 475.
Number of departments and agencies[C];
Judgment Fund payment years: 2002: 13;
Judgment Fund payment years: 2003: 18;
Judgment Fund payment years: 2004: 16;
Judgment Fund payment years: 2005: 17;
Judgment Fund payment years: 2006: 16;
Judgment Fund payment years: Total: 27.
Payments made by Judgment Fund (in millions);
Judgment Fund payment years: 2002: $243.6;
Judgment Fund payment years: 2003: $376.6;
Judgment Fund payment years: 2004: $125.7;
Judgment Fund payment years: 2005: $188.5;
Judgment Fund payment years: 2006: $82.0;
Judgment Fund payment years: Total: $1,016.
Average payment per case (in millions);
Judgment Fund payment years: 2002: $1.9;
Judgment Fund payment years: 2003: $3.5;
Judgment Fund payment years: 2005: $1.6;
Judgment Fund payment years: 2005: $2.4;
Judgment Fund payment years: 2006: $.99;
Judgment Fund payment years: Total: $2.1.
Median payment per case (in thousands);
Judgment Fund payment years: 2002: $265,714;
Judgment Fund payment years: 2003: $345,000;
Judgment Fund payment years: 2004: $360,000;
Judgment Fund payment years: 2005: $380,925;
Judgment Fund payment years: 2006: $286,667;
Judgment Fund payment years: Total: $302,486.
Source: GAO analysis of FMS data.
Note: Our analysis included data on reimbursements to the Judgment Fund
through March 31, 2007.
[A] A case can have payments to one or more claimants.
[B] Cases could be initiated several years before payments were made
from the Judgment Fund.
[C] Total number of agencies is a count of unique agencies that had a
case in fiscal years 2002 through 2006.
[End of table]
Of the approximately $1 billion paid by the Judgment Fund for the 475
CDA cases from fiscal years 2002 through 2006, agencies had fully
reimbursed just over $500 million, or about half this amount owed, as
of March 31, 2007. During that time period, agencies also partially
reimbursed just under $10 million for cases that still had remaining
balances for a total reimbursement of about $510 million. Agencies made
no payments at all towards 179 cases with a remaining total balance of
just over $495 million. As shown in table 4, these CDA reimbursements
were made in full, on average, 9.6 months after the original Judgment
Fund payment, with a range of less than 1 month to 60 months.
(Enclosure II provides additional information on the average length of
time to reimburse the Judgment Fund for CDA cases for all applicable
agencies during the 5-year period we reviewed.)
Table 4: Average Length of Time for Agencies to Fully Reimburse the
Judgment Fund for CDA Case Payments in Fiscal Years 2002 through 2006:
Number of cases with payments from Judgment Fund;
Judgment Fund payment years: 2002: 127;
Judgment Fund payment years: 2003: 107;
Judgment Fund payment years: 2004: 79;
Judgment Fund payment years: 2005: 79;
Judgment Fund payment years: 2006: 83;
Judgment Fund payment years: Total: 475.
Number of cases fully reimbursed by agencies[A];
Judgment Fund payment years: 2002: 86;
Judgment Fund payment years: 2003: 71;
Judgment Fund payment years: 2004: 53;
Judgment Fund payment years: 2005: 36;
Judgment Fund payment years: 2006: 37;
Judgment Fund payment years: Total: 283.
Percentage of cases fully reimbursed by agencies;
Judgment Fund payment years: 2002: 68;
Judgment Fund payment years: 2003: 66;
Judgment Fund payment years: 2004: 67;
Judgment Fund payment years: 2005: 46;
Judgment Fund payment years: 2006: 45;
Judgment Fund payment years: Total: 60.
Average length of time to fully reimburse Judgment Fund (in months)[B].
Judgment Fund payment years: 2002: 14.0;
Judgment Fund payment years: 2003: 10.6;
Judgment Fund payment years: 2004: 8.6;
Judgment Fund payment years: 2005: 5.3;
Judgment Fund payment years: 2006: 3.2;
Judgment Fund payment years: Total: 9.6.
Source: GAO analysis of FMS data.
Note: Our analysis included data on reimbursements to the Judgment Fund
through March 31, 2007.
[A] Changes across years in the number of reimbursed cases to the
Judgment Fund are not comparable because the percentage of cases that
were fully reimbursed is much smaller in 2005 and 2006 than in earlier
years. If, and when, cases are fully reimbursed in future years, the
averages will increase.
[B] Changes across years in the average (mean) length of time to
reimburse the Judgment Fund are not comparable because the percentage
of cases that were fully reimbursed is much smaller in 2005 and 2006
than in earlier years. Reimbursement may not occur in the same year in
which payment is made. If, and when, payments are fully reimbursed in
future years, the averages will increase.
[End of table]
Compared to No FEAR cases, reimbursements from agencies for CDA cases
have taken longer and cover only about half the amounts owed. The
difference in reimbursement rates, compared to the nearly full
reimbursement of No FEAR cases, may be due to the larger magnitude of
CDA payments and to agencies' lack of success in obtaining funds
through the appropriation process to reimburse the Judgment Fund. Table
5 shows the amount of payments from, and the level of reimbursements
to, the Judgment Fund for CDA cases during the 5-year period of our
review.
Table 5: Dollar Amount of Payments Made by Judgment Fund and
Reimbursements by Agencies for CDA Cases Owed for Payments in Fiscal
Years 2002 through 2006:
Payments made by Judgment Fund (in millions).
Judgment Fund payment years: 2002: $243.6.
Judgment Fund payment years: 2003: $376.6.
Judgment Fund payment years: 2004: $125.7.
Judgment Fund payment years: 2005: $188.5.
Judgment Fund payment years: 2006: $82.0.
Judgment Fund payment years: Total: $1,016.
Total dollars reimbursed by departments and agencies to Judgment Fund
(in millions);
Judgment Fund payment years: 2002: $99.6;
Judgment Fund payment years: 2003: $278.5;
Judgment Fund payment years: 2004: $57.7;
Judgment Fund payment years: 2005: $52.4;
Judgment Fund payment years: 2006: $22.4;
Judgment Fund payment years: Total: $510.7.
Percentage of payments reimbursed by departments and agencies[A].
Judgment Fund payment years: 2002: 40.9.
Judgment Fund payment years: 2003: 74.0.
Judgment Fund payment years: 2004: 45.9.
Judgment Fund payment years: 2005: 27.8.
Judgment Fund payment years: 2006: 27.4.
Judgment Fund payment years: Total: 50.2.
Source: GAO analysis of FMS data.
Note: Our analysis included data on reimbursements to the Judgment Fund
through March 31, 2007.
[A] The percentages shown above represent the extent to which agencies
have reimbursed the Judgment Fund for payments in CDA cases.
Reimbursement may not occur in the same year in which payment is made.
If, and when, cases are fully reimbursed in future years, the
percentages will increase.
[End of table]
FMS has limited authority to obtain CDA reimbursements and is not
authorized by statute to take any collection action against agencies.
We spoke with officials from the four agencies that, according to FMS
records, owe the most in CDA reimbursements--OPM, GSA, Interior, and
Army Corps--to discuss their agencies' unpaid CDA reimbursements and
the reasons why the agencies had not fully reimbursed the Judgment
Fund. Our work, including interviews with agency officials, indicates
that several factors, including the much greater amounts involved, may
be contributing to the difference in reimbursement rates for No FEAR
cases compared to CDA cases. Agency officials also pointed out that
there are restrictions on which funds can be used for repayment for
certain CDA cases, such as when contracts are funded by specific line-
item appropriations.[Footnote 11] Officials at three agencies--GSA,
Interior, and Army Corps--also told us that their agencies had not
reimbursed the Judgment Fund because the agencies did not have
sufficient funds available. Officials from these agencies told us, and
OMB staff agreed, that on one or more occasions these agencies have
sought additional funds with which to reimburse the Judgment Fund but
have not always received additional appropriations for this purpose,
either because OMB chose not to include the request in the President's
budget or because Congress did not appropriate the requested funds.
Officials at the fourth agency, OPM, told us that OPM does not believe
it has the authority to reimburse the Judgment Fund for an unreimbursed
balance of $253 million for several cases involving the Federal
Employee Health Benefits (FEHB) program from 1986 to 1994.[Footnote 12]
In its May 2007 strategy document for collection of amounts owed in CDA
cases, FMS said it planned to have further discussions with OPM
concerning resolution of this matter.
We spoke with selected OMB program examiners who are familiar with the
administration of the Judgment Fund and who review those agencies owing
the largest amounts to the Judgment Fund for CDA cases. According to
OMB staff, program examiners for each agency decide whether and how a
request for an appropriation to cover a CDA reimbursement should be
handled when OMB receives it. Moreover, the OMB staff said that
agencies are generally doing well with regard to making CDA
reimbursements to the Judgment Fund, and that with a few exceptions the
situation is much improved compared to 10 years ago.
According to FMS officials, prior to this year, FMS approached CDA
reimbursement obligations by sending an initial letter after each
Judgment Fund payment to the agency concerned requesting reimbursement,
and thereafter sending a quarterly notice to each agency that owed
reimbursements requesting confirmation of outstanding balances.
Following the start of our review, and after we discussed collection
practices with FMS officials, FMS conducted an internal assessment of
the No FEAR Act repayment process and identified measures within that
process that might be used to encourage agencies to reimburse their
obligations and improve the repayment rate for CDA cases. The resulting
strategy, which FMS adopted in May 2007, includes a number of actions
to encourage agency reimbursements for unpaid CDA obligations. As
discussed below, some of these actions have been taken and other
actions are planned.
* FMS recently reinstituted its practice of sending a series of billing
letters for unpaid CDA case amounts to agency CFOs, similar to the
letters sent for No FEAR Act outstanding balances. FMS first sends a
letter to the debtor agency seeking reimbursement for payments when
payment is made from the Judgment Fund. If the agency fails to contact
FMS within 30 business days of this letter, a follow-up letter is to be
sent. If the agency fails to respond within 60 business days of the
initial contact letter, FMS will send a letter to the agency's CFO, who
then has 30 business days to contact FMS.
* As called for in the strategy, the FMS Commissioner and Deputy
Commissioner have visited with various agencies' CFOs and discussed,
among other topics, the matter of CDA reimbursement obligations. FMS
officials have also engaged in numerous telephone conversations and e-
mail exchanges with agency CFO representatives to increase
responsiveness for agencies' amounts owed.
* FMS has asked agencies with CDA reimbursement obligations to notify
FMS when they request funding during the budget formulation process to
be earmarked for repayment of outstanding CDA balances.
* FMS will continue to expand its efforts to emphasize to agencies
their CDA obligations by highlighting and explaining the CDA billing
and reimbursement process in meetings, forums, on the Judgment Fund Web
site, and in publications.
* Part of FMS's planned strategy is to continue to post on the Judgment
Fund public Web site all outstanding receivable balances by agency for
unreimbursed CDA payments. Currently, FMS posts these outstanding
balances on a quarterly basis and provides agencies 30 days from the
end of the quarter to respond to FMS regarding the accuracy of the
amounts recorded.
During our exit conference with FMS officials in November 2007, FMS
officials told us that although FMS typically reports at least annually
to OMB on the amounts owed by individual agencies for CDA reimbursement
obligations, FMS does not notify Congress of this information nor does
the FMS collection strategy call for doing so. Reporting to Congress on
the amounts owed by individual agencies for CDA cases would increase
transparency regarding federal agencies' obligations to reimburse the
Judgment Fund and aid congressional decision making with regard to any
appropriations for relevant agencies.
Agency Officials Indicated that No FEAR and CDA Reimbursement
Requirements Have Not Had a Substantial Impact on Agency Operations or
Settlement Practices:
We asked officials at the departments and agencies we visited about the
effect of the No FEAR reimbursement requirements on their EEO programs,
in particular whether the requirements changed their approach to EEO
complaints, or on their decisions about whether to settle complaints
administratively or in court. Officials in several departments or
agencies told us that although the reimbursement requirements have led
to changes in internal EEO training and guidance, with emphasis being
placed on their enhanced financial liability for an EEO violation,
there had been little or no effect on operations, appropriations, and
employee relations and other human capital matters, no change in how
complaints were handled, and no impact on the decision making as to
whether or not to settle a complaint or court case.
Officials at the departments and agencies also told us that there had
been no instance in which reimbursement of the Judgment Fund for a
payment in a case under the No FEAR Act necessitated an adjustment in
the agency's budget. For the 36 departments or agencies that reimbursed
the Judgment Fund for payments in EEO cases from fiscal years 2004
through 2006, we reviewed 22 agencies' annual Section 203
reports.[Footnote 13] Under Section 203 of the No FEAR Act, departments
and agencies are required to, among other things, report annually on
any adjustment (to the extent the adjustment can be ascertained) made
in the budget of the agency to comply with the requirement for
reimbursement of the Judgment Fund in EEO or whistleblower cases. As
part of this Section 203 report, agencies are also required to analyze
discrimination data and report trends, causal factors, and planned
improvements in complaint handling and EEO programs.[Footnote 14] Our
review of agencies' Section 203 reports, specifically focused on the
effect of the reimbursement requirement on operations, showed that
there was a minimal impact, if any, due to reimbursements to the
Judgment Fund and that there was no need for any adjustment to their
budgets in order to comply with the No FEAR Act. However, an official
from one department, Interior, reported that dollars that would
otherwise have gone into mission needs were instead used to reimburse
the Judgment Fund. Also, in its Section 203 report for fiscal year
2006, the Department of Transportation (DOT) stated that DOT's Federal
Aviation Administration created object classification codes[Footnote
15] to track the financial impact of EEO settlements and findings of
discrimination at the administrative stage.
We also discussed the effect of the Judgment Fund reimbursement
requirements on No FEAR litigation strategy with an official of the
Office of the U.S. Attorney for the District of Columbia, which
represents federal agencies in EEO court cases. The official told us
that, as far as he and his staff were aware, although some agencies
have historically been more likely to settle cases than have other
agencies, the reimbursement requirements under No FEAR have had little
or no effect on agencies' preferences or actions in this regard. The
official added that the reimbursement requirement also has had no
effect on his or his staff's decisions regarding litigation strategy
and settlement practices.
To obtain views on the effect of CDA reimbursement requirements on
litigation regarding CDA cases, we spoke with officials of DOJ's Civil
Division, which represents federal agencies in CDA cases and other
types of civil litigation. These officials told us that the CDA
reimbursement requirements had no effect on agencies' preferences or
actions in settling litigation, or on the Civil Division's decisions in
such situations.
Conclusions:
Although CDA and No FEAR cases deal with different types of civil
actions against federal agencies, these cases share a common
requirement that agencies reimburse the Judgment Fund for payments for
judgments, awards, settlements, or other costs in such civil actions.
An examination of compliance with the reimbursement requirements of
these acts shows a significant difference in repayment rates. Although
agencies have made nearly all reimbursements to the Judgment Fund for
No FEAR cases since the requirement began in 2002, some agencies have
not fully reimbursed the Judgment Fund for CDA cases. Overall, as of
March 31, 2007, only about half of the CDA amounts owed to the Judgment
Fund for payments made from fiscal years 2002 through 2006 had been
reimbursed. The difference in reimbursement rates between EEO cases
under No FEAR and CDA can be influenced by a number of factors,
including that CDA cases involve much larger payments and subsequent
reimbursements than do No FEAR cases.
FMS is taking steps towards implementing its new CDA collection
strategy adopted in May 2007, focused on a continued effort to work
with agencies and ensure that it has complete information about the
status of each agency with regard to CDA reimbursement obligations.
However, the strategy does not provide for reporting to Congress the
amounts owed by individual departments and agencies for CDA
reimbursement obligations. The new FMS strategy could increase
transparency regarding federal agencies' obligations to reimburse the
Judgment Fund and aid congressional oversight and decision making if it
also included notification to Congress of the amounts owed by
individual agencies related to CDA cases.
Recommendation for Executive Action:
We recommend that the Commissioner of FMS notify Congress on a periodic
basis of the amounts owed the Judgment Fund by each federal department
and agency for all CDA obligations.
Agency Comments:
We provided the Commissioner of FMS and the Attorney General with a
draft of this report for their review and comment. In its written
comments, FMS said that, while it understood the impetus for our
recommendation, requiring that FMS report to Congress on unpaid
reimbursements by agencies, as we recommend, would not improve
transparency but would simply create a duplicate reporting requirement
because such information is already available to Congress and others on
the FMS Web site. FMS also said that if the goal is to increase
transparency, it would make more sense for agencies to report their
individual outstanding balance to Congress and OMB on a periodic basis.
We believe, however, that Congress's needs can best be served in this
matter by receiving all relevant information from a single source on a
periodic basis (for example, annually), rather than having to seek out
the information on a Web site or receive it piecemeal from individual
agencies. FMS's comments are reprinted in enclosure III. DOJ provided
technical comments via e-mail, which we incorporated where appropriate,
but did not otherwise comment on the report or our recommendations.
We are sending copies of this report to the Attorney General and
congressional recipients as mandated in the No FEAR Act. We will also
make copies available to others upon request. This report will also be
available to others at no charge on the GAO website at [hyperlink,
http://www.gao.gov].
If you have any questions concerning this report, please contact me at
(202) 512-6806 or stalcupg@gao.gov. Contact points for our Office of
Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report included Anthony
P. Lofaro and K. Scott Derrick, Assistant Directors, Steven J. Berke,
Carole J. Cimitile, William P. McKelligott, Gregory H. Wilmoth,
Mitchell B. Karpman, Christine Chi San, and Karin K. Fangman.
Signed by:
George H. Stalcup:
Director, Strategic Issues:
List of Addressees:
The Honorable Robert C. Byrd:
President Pro Tempore:
United States Senate:
The Honorable Nancy Pelosi:
Speaker:
House of Representatives:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Daniel K. Akaka:
Chairman:
The Honorable George V. Voinovich:
Ranking Member:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Danny K. Davis:
Chairman:
The Honorable Kenny E. Marchant:
Ranking Member:
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable John Conyers:
Chairman:
The Honorable Lamar Smith:
Ranking Member:
Committee on the Judiciary:
House of Representatives:
The Honorable Michael B. Mukasey:
Attorney General:
Department of Justice:
[End of section]
Enclosure I:
Objectives, Scope, and Methodology:
Our objectives were to (1) determine in how many cases payments were
made from the Judgment Fund for judgments, settlements, or awards
resulting from (a) equal employment opportunity (EEO) and whistleblower
protection complaints after the Notification and Federal Employee
Antidiscrimination and Retaliation (No FEAR) Act became effective, and
(b) contract disputes; (2) determine in how many cases and to what
extent agencies made reimbursement to the Judgment Fund and how long
reimbursement took; and (3) obtain agency official and stakeholder
views of the effects of the requirement to reimburse the Judgment Fund
for EEO/whistleblower and Contract Disputes Act (CDA) cases on
operations, appropriations, employee relations and other human capital
matters, and settlement practices at federal agencies.
Our primary method for addressing the first and second objectives was
to obtain and analyze data on Judgment Fund payments, and agency
reimbursements, from the Financial Management Service (FMS). We
screened the data for duplicate records, anomalies, and inconsistencies
within and between payment and reimbursement data and reconciled the
corrected data with FMS. After correcting the data based on the
reconciliation process, we found the data to be sufficiently reliable
for our purposes to answer the first and second objectives. Our
analyses included only payments to the Judgment Fund made in fiscal
years 2004 through 2006 for No FEAR cases and in fiscal years 2002
through 2006 for CDA cases. FMS subsequently gave us data covering the
period from October 1, 2006, through March 31, 2007; we did not analyze
payments made during this period, but we did include in our analysis
reimbursements made during this period if they were for payments made
from fiscal 2002 through 2006. If a case had payments both before
fiscal year 2002 and in or after fiscal year 2002, then we analyzed
only the payments in or after fiscal year 2002. We used the fiscal year
in which the last payment for a No FEAR or CDA case was made to assign
the case to a fiscal year. For cases where payments for a case occurred
in more than 1 fiscal year, the case was assigned to the fiscal year in
which the last payment for the case was made. Similarly, we calculated
the average length of time to fully reimburse the Judgment Fund by
finding the difference between the date of the last payment made for a
case and the last reimbursement made to the Judgment Fund. For the few
cases where we could not reconcile the discrepancy between the agency
responsible for the claim and the agency that reimbursed FMS for the
claim, we included these amounts in the summary tabulations but not in
the agency-by-agency tabulations. In addition, we discussed Judgment
Fund payment and reimbursement procedures with FMS officials and
reviewed relevant regulations, policies, and guidance.
To address our third objective, we interviewed officials at seven
federal agencies. We selected the four agencies that, according to FMS
records, had the largest current unpaid reimbursement amounts for CDA
cases as of September 30, 2006: the Army Corps of Engineers, the
Department of the Interior, the General Services Administration, and
the Office of Personnel Management (OPM). We also selected three
agencies that had a large number of No FEAR Act cases: the Department
of Agriculture, the Department of Veterans Affairs, and the Department
of Justice (DOJ). The agency officials we held discussions with
included staff of the general counsel's office, the EEO office, the
human capital office, the budget office, and the office of the Chief
Financial Officer.
In addition, we interviewed staff from the Office of Management and
Budget to discuss the budgeting process for dealing with the agency
reimbursement requirement. We also held discussions with DOJ officials
responsible for representing federal agencies in EEO and contract
disputes litigation, and with officials of OPM and the Equal Employment
Opportunity Commission, the leadership agencies primarily responsible
for oversight of EEO and diversity programs in federal agencies. We
also reviewed available reports filed by federal agencies under Section
203 of the No FEAR Act to gather any information on the impact of No
FEAR reimbursements on department or agency budgets. Of the 36
departments or agencies that were obligated to reimburse the Judgment
Fund for payments from fiscal years 2004 through 2006, we were able to
obtain copies of the Section 203 reports for 22 departments or
agencies, primarily from congressional sources mandated to receive
these reports under the No FEAR Act. (Enclosure II shows for which
agencies we obtained and reviewed the Section 203 reports).
We conducted this performance audit from July 2006 to February 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Table 6: NO FEAR Act: Number of Cases and Dollar Volume for Judgment
Fund Payments Fully Reimbursed by Agencies (as of March 31, 2007 for
fiscal years 2004 to 2006)[A]:
[See PDF for image]
Source: GAO analysis of FMS data.
Note: As of March 31, 2007, two payments made by the Judgment Fund
during fiscal year 2004 through fiscal year 2006 has not been
reimbursed: a payment %197, 139 made on behalf of the Department of the
Treasury during fiscal year 2005, and a payment of $10,000 made on
behalf of the Department of Homeland Security during fiscal year 2006.
[End of table]
Table 7: No FEAR Act: Average Length of Time to Reimburse the Judgment
Fund for Cases Fully Reimbursed (as of March 31, 2007 for fiscal years
2004 to 2006):
[See PDF for image]
Source: GAO analysis of FMS data.
[End of table]
Table 8: CDA: Number of Cases and Dollar Volume for Judgment Fund
Payments Fully Reimbursed by Agencies (as of MArch 31, 2007 for fiscal
years 2002 to 2006)[A]:
[See PDF for image]
Source: GAO analysis of FMS data.
[A] Note that there were no partial reimbursements made to Judgment
Fund during fiscal year 2002.
[B] Split reimbursements occur when an agency reimburses for the same
case in multiple payments.
[End of table]
Table 9: CDA: Number of Cases and Dollar Volume Where No Agency
Reimbursements Have Been Made (as of March 31, 2007 for fiscal years
2002 to 2006):
[See PDF for image]
Source: GAO analysis of FMS data.
[End of table]
Table 10: CDA: Number of Cases and Dollar Volume of Amounts Partially
Paid to Reimburse Judgment Fund (as of March 31, 2007 for fiscal years
2003 to 2006)[A]:
[See PDF for image]
Source: GAO analysis of FMS data.
[A] Note that there were no partial reimbursements made to Judgment
Fund during fiscal year 2002.
[B] Split reimbursements occur when an agency reimburses for the same
case in multiple payments.
[End of table]
Table 11: CDA: Number of Cases and Average Length of Time to Reimburse
the Judgment Fund For Cases Fully Reimbursed (as of March 31, 2007 and
fiscal years 2002 to 2006)[A]:
[See PDF for image]
Source: GAO analysis of FMS data.
[A] Table does not include averages for partial reimbursement. Average
length of time to fully reimburse the Judgment Fund will increase as
partially reimbursed cases are fully paid.
[End of section]
Enclosure III:
Comments from the Financial Management Service:
Department Of The Treasury:
Financial Management Service:
Washington, D.C. 20227:
February 13, 2008:
Memorandum for George L. Stalcup:
Director, Strategic Issues:
Signed by:
From: Judith Tillman:
Subject: The Judgment Fund: Status of Reimbursements Required by the No
FEAR Act and Contract Disputes Ant:
Thank you for the opportunity to comment on the draft audit report
entitled "The Judgment Fund: Status of Reimbursements Required by the
No FEAR Act and Contract Disputes Act."
We appreciate the Government Accountability Office's (GAO's) review of
agencies' reimbursement rates under the No FEAR Act and the Contract
Disputes Act (CDA), and we found GAO's graphic presentations of the
payment data in Tables I and 3 of its report to be particularly
valuable. These tables illustrate that the magnitude of CDA payments in
comparison to No FEAR Act payments is significant. For example, average
payment amounts in No FEAR Act cases are reported in the thousands of
dollars, whereas the average amounts in CDA cases are presented in the
millions of dollars. Also, for all the years reported, the median CDA
payment is more than ten times the median No FEAR Act payment.
The report concludes that a notification from FMS to Congress of the
amounts agencies owe under the CDA would increase transparency and
perhaps improve agencies' reimbursement rates under the CDA. We
understand the impetus for this recommendation because FMS has
periodically heard from agencies that they are unable to satisfy their
CDA obligations due to their lack of success in obtaining supplemental
appropriations. We do not believe however, that a notification from FMS
to Congress of the amounts agencies owe under the CDA will increase the
transparency of agencies' funding status or in any way ameliorate these
situations. We say this because the information GAO would like FMS to
report to Congress is already publicly available and has been for
years. FMS currently reports, and updates quarterly, the outstanding
CDA amounts owed by federal agencies on the FMS public website. This
information is available to Congress, all federal agencies, the Office
of Management and Budget (OMB), other decision makers, and any member
of the public who visits the public website. A periodic notification of
this same information from FMS to Congress would not lead to any
greater transparency, but would merely result in a duplicate reporting
requirement. More to the point, a periodic notification to Congress of
information that is available on a public website would provide members
of Congress no new information to assist them in making decisions about
agencies' appropriations.
If the aim of this recommendation is to increase transparency and to
assist decision makers in the appropriations process, then it would
make more sense for federal agencies to report their individual
outstanding CDA balances to Congress and OMB on a periodic basis.
Agencies are in a far better position than FMS to explain to Congress
and OMB their outstanding CDA balances and to provide additional
information that might assist Congress and OMB during the budget
justification process and when assessing agency requests for
supplemental appropriations to reimburse the Judgment Fund.
Again, FMS appreciates the opportunity to comment on this draft report.
Thank you for your consideration of our comments.
cc: Kenneth E. Carfine
[End of section]
Footnotes:
[1] Pub. L. No 107-174, § 201, 166 Stat. 566, 568 (May 15, 2002). See 5
U.S.C. § 2301 note.
[2] GAO, No FEAR Act: Methods the Justice Department Says It Could Use
to Account for Its Costs Per Cases under the Act, GAO-04-863
(Washington, D.C.: July 22, 2004); GAO, Judgment Fund: Treasury's
Estimates of Claim Payment Processing Costs under the No FEAR Act and
Contract Disputes Act, GAO-04-481 (Washington, D.C.: Apr. 28, 2004).
[3] Pub. L. No. 95-563, § 13, 92 Stat. 2383, 2389 (Nov. 1, 1978)
(codified, as amended, at 41 U.S.C. § 612).
[4] For purposes of this report, the term "payment" refers to
disbursements from the Judgment Fund on behalf of a federal agency to a
claimant for monies owed. The term "reimbursement" refers to federal
agencies' repayment to the Judgment Fund for amounts disbursed on their
behalf.
[5] Act of July 27, 1956, ch. 748, § 1302, 70 Stat. 694, (codified as
amended at 31 U.S.C. § 1304).
[6] Pub. L. No. 87-187, § 2, 75 Stat. 415 (Aug. 30, 1961). Subsequent
amendments expanded the scope of payments from the Judgment Fund to
include certain administrative awards and awards by agency boards of
contract appeals.
[7] Section 211 of Pub. L. No. 104-53 (Nov. 19, 1995) transferred GAO's
authority over the certification of payments from the Judgment Fund to
the Office of Management and Budget, which delegated this function to
FMS.
[8] Pub. L. No. 107-174, § 201(b).
[9] Pub. L. No. 107-174, § 102(6)(A).
[10] See 63 Comp. Gen. 308 (1984).
[11] In individual instances, agencies may request advance decisions
from the Comptroller General with regard to the availability of funds
for purposes of reimbursing the Judgment Fund. See, 63 Comp. Gen. 308.
[12] As administrator of the FEHB program, OPM was involved in
litigation against the U.S. government in which certain FEHB carriers
sought relief for alleged underpayments of premiums incurred by
employing agencies. According to OPM, these lawsuits came about because
several carriers were not receiving the appropriate dollar amount of
premiums based on the number of employees enrolled in their insurance
programs. OPM officials explained that while OPM enters into contracts
with the FEHB carriers, the premium payments it forwards to the
carriers originate from employing agency funds and that in OPM's view,
it would be improper to use its own funds to reimburse the Judgment
Fund for payments made in settlement of these cases. OPM officials
further stated that an effort to attribute amounts paid out of the
Judgment Fund to each employing agency was deemed impracticable given
the expected difficulty in producing accurate premium payment
calculations, which factored into the government's underlying decision
to settle these cases.
[13] Section 203(a) of the No FEAR Act requires that each federal
agency send an annual report to the Speaker of the House of
Representatives, the President Pro Tempore of the Senate, several
congressional committees, the Equal Employment Opportunity Commission,
and the Attorney General. These reports must contain data on the number
of cases in which an agency was alleged to have discriminated; the
disposition of each of these cases; the amount of money paid out of the
Judgment Fund in connection with these cases; the number of employees
disciplined for discrimination, retaliation, or harassment; and a
detailed description of the policy implemented by the agency to take
appropriate disciplinary actions against any federal employee who (1)
discriminated against any individual, or (2) committed another
prohibited personnel practice that was revealed in the investigation of
a complaint alleging a violation of any of the discrimination or
whistleblower laws cited in the act. Agencies are also required to
analyze these data and report trends, causal factors, and planned
improvements in complaint handling and EEO programs.
[14] Agencies with which we had discussions on this matter reported
that they were conducting the mandatory No FEAR Act training required
under Section 202 of the act regarding the rights and remedies
applicable to federal employees, but this did not specifically relate
to the effect of the reimbursement requirement.
[15] An object classification code is a uniform classification
identifying the obligations of the federal government by the types of
goods or services purchased (such as personnel compensation, supplies
and materials, and equipment) without regard to the agency involved or
the purpose of the programs for which they are used.
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